TIP - The Coming Rate Insensitivity

2024-07-18 06:24:15 ET

Summary

• An analysis of how rate cuts are likely to affect the U.S. economy.
• Investment implications for the upcoming cutting cycle and beyond.
• A description of a three-pillar portfolio, which can protect wealth through multiple market conditions.

The first topic for this issue focuses on the observation that the U.S. economy will likely be de-sensitized to interest rate cuts in the next business cycle, similar to how it was de-sensitized to interest rate hikes during this prior cycle.

The second topic examines what investing implications this might have.

Managing Two Time Horizons

As a long-term investor rather than a trader, I mostly optimize for two time horizons in my analysis: intermediate term and long term.

The intermediate term time horizon looks out 18 months or so, to see if we’re likely in a rising cycle or a falling cycle in terms of liquidity, economic activity, and so forth. I use this time horizon mainly for setting expectations and risk management....

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